Sunday, October 30, 2016

Totally Growthed Out!

Look at the above chart (measured in trillions of dollars, corrected for inflation to 2010 dollars). Washington Post, October 24th. See anything missing from the older numbers? How about the two nations that have risen, respectively to second and third place in recent years: China (almost $10T today) and India (almost $6T)? By 2030, those numbers should drop to $23.9T for the United States (assuming that our political system remains intact), but rise to $18.8T for China and $7.3T for India. The U.S. will still be top but will hold a lesser number and share of the total, facing a very probable move to second position by 2050 as China continues to grow.
What is fascinating is how both China and India were mostly limping along throughout most of the 20th century. Until 1991, India blocked its currency and had highly exclusionary trade barriers, particularly making foreign investment there almost impossible. Until China was able to shake its Maoist form of communism, which began in the 1980s under Deng Xiaoping, it wasn’t even a participant in the global economy at any measurable level. These two Asian nations didn’t even make the list of top economies until the 1990s. But the 21st century became the era of the rise of China and India to the highest levels of global impact.
While no one is saying that poverty is anywhere near eliminated in these two economic superpowers, and while the per capita numbers still push the United States way on top, the ultimate economic reforms, still very much underway in both nations, have lifted well over a billion people out of dire poverty and added hundreds of millions of people to the middle class. Meanwhile, Western powers are beginning to stagnate, burdened with aging infrastructure and a need to update and improve educational standard or risk being completely eclipsed by new Asian educational systems built to compete at the highest levels.
It is no wonder then that those in the developing world are beginning to believe that old world democracies – represented heavily by Europe and the United States – can no longer deliver the kind of economic growth that a centrally-directed economic power that calls the shots without much regard for the opposition. To many in the third world, they believe that this reality gives the People’s Republic of China the edge over India, which still seems to trip over itself in internecine political wrangling within its own democratic institutions. This, many in the developing world believe, is why they think China is a better-constructed power. And China is solidly under the control of a very-much-in-power strongman with a powerful “China first” mandate. Xi Jinping.
As Americans continue to lose faith in their own governmental institutions, the newest populist movement in the United States is clearly one that eschews basic constitutional limits and protections, arguing for restrictions on religious groups, mass deportations and increased open rules on gun ownership. Instead of focusing on achieving balance and compromise, the new trends in the United States seem to reflect this global trend toward centralized and rather blanket political power resting with a “strongman” at the helm… to solve the perceived failings of government.
While Donald Trump doesn’t look like he is going to score this time around, many argue that his strongman-arguments resonated with the majority of voters; it was only his deeply-flawed character that will cost him the presidency. He seems to have 40% popular support no matter the final results of the election. Is this where we are headed? Are we ourselves gravitating toward a centralized government… like China… and away from democracy?
A strongman philosophy in the United States is a fundamental rejection of the American model. We are even undermining the efficacy of democracy as viable in the 21st century. If even America is rejecting that path, this does suggest that we’re not much in the way of a model for those nations evolving their own futures. But China, with growth rates well over 6%, seems to be a shining beacon.
Justice David Souter, retired Supreme Court justice, has been listening to our election rhetoric… fearing that Trump’s suggested form of government, which rests on civic ignorance of democratic principles, is a much greater threat to our survival as a free and democratic nation than any extrinsic threats from overseas: “What I worry about is, when problems are not addressed and the people do not know who is responsible … some one person will come forward and say, ‘Give me total power and I will solve this problem,’” he said. “That is how the Roman Republic fell… That is the way democracy dies…”, October 24th.
The ancient Roman model elevated one Senator as a dictator to lead the empire in times of crises, with the notion that once the crises subsided, he would return to retake that Senate seat. They never did. They were called “Caesar” and simply held onto that autocratic power until they were usurped or simply died. Roman unraveled under this model. To Souter, the mere rise of such a “strongman” is a historical lesson for the beginning of the end for the form of any government that has positioned such an individual at the top with extraordinary and extra-constitutional powers.
If one were to pick governments by growth numbers, the U.S. cannot compete. We are a mature economy where GDP growth rates between 2% and 4% are more than satisfactory, and even a fall to lower than 2% isn’t the end of the world. We do not have the hundreds of millions of impoverished citizens yet left to elevate to create growth rates such as those in either India or China. So comparing growth rates between a very-well-developed economy and those of a developing economy would indeed be comparing apples and oranges.
And trust me, all is not a bed of roses for either China or India, where corruption and pollution could bring either nation to a grinding and bitter slowdown or even a reversal. “At the same time, China and India remain at the heart of profound global challenges: Both nations are grappling with the disastrous effects their economic ascent is having on the environment and will also account for some of Asia's most staggering rates of income inequality.” Washington Post.
The popularity of a “strongman” solution for American ailments is a terrible sign for the survivability of the United States as a single, powerful free nation. Should that political philosophy ever be implemented here, we can expect the country to shatter and break up into component nations… most likely with significant bloodshed. Not only can it happen here; it has happened here. If this new Civil War were to occur, the world will also experience an economic disruption that will make our last recession look like a little global sneeze.
I’m Peter Dekom, and until Americans start prioritizing compromise and putting America first (really, not just words), that existential threat to us all increases in probability every day.

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